DHD2011 MKT243 Fundamental Of Marketing 1

Fundamental Of Marketing

MKT243

Chapter 4

Market Segmentation and Targeting Market

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Segmenting and Targeting Market

Definition of segmenting Reasons for segmenting Criteria for Successful segmentation Market Targeting Differentiation and Positioning

Topic Outline

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Market segmentation is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs (Kotler and Gary)

Market segmentation is the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups (McDaniel, Lamb, Hair)

Market Segmentation

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Market Segmentation

MarketMarket

MarketSegmentMarket

Segment

MarketSegmentation

MarketSegmentation

People or organizations with needs or wants and the ability and

willingness to buy

People or organizations with needs or wants and the ability and

willingness to buy

A subgroup of people or organizations sharing one or more characteristics that

cause them to have similar product needs.

A subgroup of people or organizations sharing one or more characteristics that

cause them to have similar product needs.

The process of dividing a market into meaningful, relatively similar, identifiable

segments or groups.

The process of dividing a market into meaningful, relatively similar, identifiable

segments or groups.

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A Market Is...

(1) people or organizations with

(2) needs or wants, and with

(3) the ability and

(4) the willingness to buy.

A group of people that lacks any one of these characteristics is not a market.

The Importance of Market Segmentation

6

Markets have a variety of product needs and preferences.

Marketers can better define customer needs.

Decision makers can define objectives and allocate resources more accurately.

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Criteria for Successful Segmentation

Substantiality Identifiably and measurability Accessibility Responsiveness Actionable

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Bases for segmenting Consumer Markets

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Market Segmentation

Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities

Segmenting Consumer Markets

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Market Segmentation

Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality

Segmenting Consumer Markets

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Market Segmentation(Demographic Segmentation)

Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups

Gender segmentation divides the market based on sex (male or female)

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Market Segmentation

Income segmentation divides the market into affluent or low-income consumers

Ethnic Segmentation divides the market into races or ethnicity

Family Life-Cycle Segmentation divides market based on stages determined by a combination of age, marital status, and the presence or absence of children.

(Demographic Segmentation)

Family Life Cycle

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Market Segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits

The basis for Psychographic segmentation are as follow:

1. Personality-Reflects a person’s traits, attitudes and habits. According

to national survey by Roper, almost half of Americans believe their cars match their personality.

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Cont…2. Motives

-Marketers of baby products and life insurance appeal to consumers’ emotional motives-namely, to care for their loved ones

3. Lifestyles

-Divides people into groups according to the way they spend their time, the importance of the things around them, their beliefs, and socioeconomic characteristics such as income and education.

4. Geodemographic

-Segmenting potential customers into neighborhood lifestyles categories

-It combines geographic and demographic and lifestyles segmentations.

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Market Segmentation

Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product

Occasions Benefits sought User status Usage rate Loyalty status

Segmenting Consumer Markets

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Steps in Segmenting a Market

1 2 3 4 5 6

Select a Market

or productCategoryFor study

Choose abasis or bases for

segmentingthe market

Select segmentation

description

Profile and analyze

segments

Select target market

Design, implement

and maintain appropriate marketing

mixes

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Market Targeting

Target market consists of a set of buyers who share common needs or characteristics that the company decides to serve

Selecting Target Market Segments

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Strategies for Selecting Target Markets

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy

Undifferentiated Targeting Strategy

20

UndifferentiatedTargetingStrategy

UndifferentiatedTargetingStrategy

A marketing approach that

views the market as one big

market with no individual

segments and thus

requires a single

marketing mix.

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Concentrated Targeting Strategy

21

ConcentratedTargeting Strategy

ConcentratedTargeting Strategy

A strategy used to select one

segment of a market for

targeting marketing efforts.

Niche

One segment of a

market.

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Multisegment Targeting Strategy

22

MultisegmentTargetingStrategy

MultisegmentTargetingStrategy

A strategy that chooses two or

more well-defined market

segments and develops a

distinct marketing

mix for each.

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Advantages and Disadvantages of Target Marketing Strategies

Targeting Strategy Advantages Disadvantages

Undifferentiated Potential savings on production/ marketing costsCompany more susceptible to competition

Unimaginative product offerings

Concentrated Concentration of resourcesCan better meet the needs of a narrowly defined segmentAllows some small firms to better compete with large firmsStrong positioning

Segments too small, or changingLarge competitors may more effectively market to niche segment

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Cont…Targeting Strategy Advantages Disadvantages

Multisegment Greater financial successEconomies of scale in producing/ marketing

High costsCannibalization

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Marketing Targeting

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations

Local marketing Individual marketing

Target Market Strategies

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Market Targeting

Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups

Cities Neighborhoods Stores

Target Market Strategies

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Market Targeting

Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers

Also known as: One-to-one marketing Mass customization Markets-of-one marketing

Target Market Strategies

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Forces Influencing One-to-One Marketing

Demand for marketing accountabilityDemand for marketing accountability

Emergence of new media alternativesEmergence of new media alternatives

Declining brand loyaltyDeclining brand loyalty

More demanding, time-poor consumersMore demanding, time-poor consumers

More diverse societyMore diverse society

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Positioning Def: Developing specific marketing mix to influence

potential customer’s over all perception of a brand, product line, or organization in general

Product positionThe way the product is defined by consumers on important attributes-the place the product occupies in consumers’ minds relative to competing products

Product differentiationA positioning strategy that some firms use to distinguish their products from those of competitors.

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Effective Positioning

1. Assess the positions occupied by competing products

2. Determine the dimensions of these positions

3. Choose an effective market position

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Perceptual Mapping A means of displaying or graphing in two or

more dimensions the location of products, brands or groups of products in customers’ minds

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Perceptual Mapping

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Perceptual Mapping

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Positioning Bases

Product Attributes/benefit Price and quality Use or application Product user Product class Competitor Emotion